Fox-Sky Deal: UK Authority Says “Not In The Public Interest”; Hints Disney Could Help

Britain’s Competition and Markets Authority this morning delivered a blow to the proposed £11.7B ($16.3B) takeover of Sky by Fox. The CMA today published the provisional opinion from its in-depth examination of Rupert Murdoch’s long-coveted acquisition of the 61% of Sky that Fox does not already own, saying it is “not in the public interest.” While the results lean negative, there’s a hint in there that if the proposed Disney-Fox deal goes through, some concerns “would fall away.”

The CMA has been investigating the Fox-Sky takeover on the grounds of media plurality and commitment to broadcasting standards. In the former, it found Fox taking full control of Sky is not in the public interest. But it also notes this is “not because of a lack of a genuine commitment to meeting broadcasting standards in the UK.”

In response to the CMA, 21st Century Fox said it “welcomes the CMA’s provisional finding that the company has a genuine commitment to broadcasting standards and the transaction would not be against the public interest in this respect. Regarding plurality, we are disappointed by the CMA’s provisional findings. We will continue to engage with the CMA ahead of the publication of the final report in May. We also note that the CMA has elected to avail itself of the statutory 8-week extension, moving its deadline for a final decision to May 1, 2018. We anticipate regulatory approval of the transaction by June 30, 2018.”

With regard to the deadline, this was the same tack that 21CF took after the proposed, and seismic, $66B Disney-Fox tie-up was announced in December. Former Culture Secretary Karen Bradley, who stepped down earlier this month, had previously referred the Sky takeover to the CMA in September. In the interim, a new Secretary of State for Digital, Culture, Media and Sport, Matt Hancock, was appointed to replace Bradley.

Today, the CMA says, “Media plurality goes to the heart of the UK’s democratic process and as such is given protection in law.” It has provisionally found that if the deal went ahead, as currently proposed, “it would lead to the Murdoch Family Trust, which controls Fox and News Corporation, increasing its control over Sky, so that it would have too much control over news providers in the UK across all media platforms (TV, Radio, Online and Newspapers), and therefore too much influence over public opinion and the political agenda.”

The Fox News channel was shuttered in the UK last year, ostensibly owing to low viewership, but the CMA is also concerned about power over Sky News. It says that the Murdoch Family Trust’s outlets are “watched, read or heard by nearly a third of the UK’s population” and have “a combined share of the public’s news consumption that is significantly greater than all other news providers, except the BBC and ITN.”

Because of its control of News Corp, the CMA says, “the Murdoch family already has significant influence over public opinion and full ownership of Sky by Fox would strengthen this even further. While there are a range of other news outlets serving UK audiences, the CMA has provisionally found that they would not be sufficient to moderate or mitigate the increased influence of the MFT if the deal went ahead.”

Among the remedies the CMA proposes are the blocking of the deal altogether, a spin-off or divestiture of Sky News or “behavioural remedies,” which would “insulate Sky News from the MFT’s influence.”

On the bright side, the investigation found that with regard to a genuine commitment to broadcasting standards in the UK, “Fox taking full control of Sky is not likely to operate against the public interest.”

Overall, it said, “Fox has a genuine commitment to broadcasting standards in the UK. It is an established broadcaster here, having held licences for over 20 years. The CMA took account of the policies and procedures Fox has in place to ensure broadcasting standards are met. It found that while there were issues with the compliance arrangements at Fox News when it was broadcasting its unedited simulcast international feed into the UK, this did not outweigh the detailed and effective policies and procedures that Fox has in place in relation to its UK focused channels.”

The CMA also provisionally found that Sky “has a good record in this regard, consistently complying with broadcasting regulation. It also has comprehensive and effective policies and procedures in place to ensure broadcasting standards are met.”

Following the phone-hacking scandal of 2011, News Corp’s newspapers’ “record of compliance with press standards does not raise concerns.”

The investigation also considered the recent allegations of sexual harassment against Fox News employees in the United States. “While these are serious, the CMA has provisionally found that these are not directly related to the attainment of broadcasting standards and do not call into question Fox’s or the MFT’s commitment to broadcasting standards in the UK.”

Next up is a series of potential options for addressing the problems identified in the CMA’s public remedies notice. It notes that the sale to Disney “will itself be subject to regulatory scrutiny and it is unlikely to be completed until after the CMA inquiry has concluded. It is therefore uncertain whether, when or how that transaction will be completed. As such, the CMA’s analysis of the Fox/Sky transaction cannot take it into account in its assessment of the transaction but implications of the Disney transaction in relation to remedies is considered in the notice of possible remedies.”

That addendum states, however, that if the Disney-Fox transaction is completed, it would “significantly weaken the link between the MFT and Sky which is at the root of our provisional concerns about media plurality. Consequently, on the face of it, these concerns would fall away if the Disney/Fox transaction went ahead as announced.”

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